(Bloomberg) -- Steve Simpson thought he was getting ahead of the curve by filing for unemployment insurance right after losing his job in March.
Almost a month later, he’s still stuck in bureaucratic limbo, along with millions of increasingly frustrated Americans. They’re the self-employed entrepreneurs, contractors and gig workers who make up a big chunk of the 21st-century economy.Unemployment claims data due Thursday will likely show a deepening toll from the coronavirus, which has destroyed jobs at an unprecedented pace in the economy’s worst rout since the Great Depression.
Simpson’s story shows the painful new daily reality behind those numbers, for many of those still left behind, as states scramble to get them help.
“I just paid up everything for April yesterday, and now I have a grand total net worth of $45,” the 52-year-old aviation contractor from Lynchburg, Virginia said in an interview this week. “I can’t go any further without some help. I need it now.”
Extending jobless benefits to the self-employed, who wouldn’t ordinarily qualify, was a key part of the $2 trillion rescue package known as the CARES Act approved by President Donald Trump and Congress last month.
But unemployment insurance in America is a patchwork of 50 state-level operations, and they need time to catch up. In Virginia, officials say their new system to handle claims by the self-employed and contractors will be up and running within weeks.Simpson said he’s only received two vague texts from state authorities about his claim, and been unable to get better guidance online or by phone.
“They’re really taking way too long,” he said. “It shouldn’t be that hard to figure out.”
Officials are struggling with out-of-date technology. But they are also creating a major new portion of the safety net on the fly, to reflect something that’s been left outside it until now: the changing nature of employment in America, and the growth of contract-based and gig work.
Flying Blind
And they’re simply having to guess how many Americans now fall into this category -– because a clear definition and count of the “gig economy” has evaded analysts for years.In Colorado, officials preparing to open applications for the new benefits reckon that 300,000 self-employed workers might be eligible. But they admit they’re flying blind.“We don’t truly know what the universe is in terms of percentage of the workforce,” said Cher Haavind, a spokesperson for the Colorado Department of Labor and Employment. “It’s a little bit gauge-as-we-go.”
One popular image of the gig economy, as a realm of Uber (NYSE:UBER) drivers and TaskRabbit contractors, misses a broader trend. Companies in recent decades have increasingly turned to consultants, contractors and temporary workers for everything from maintenance and janitorial work to logistics or human-resources management.
One in six workers in the U.S. count as gig workers under the criteria used by the ADP (NASDAQ:ADP) Research Institute, which are based on how people file their taxes. That’s up 15% from the start of the decade, and would equate to more than 25 million Americans. A 2015 study by the Pew Research Center put the share of the self-employed and those working for them even higher, at about 30%.David Weil, a senior Obama administration labor official now at Brandeis University, says the U.S. has a “fissured” workforce and a labor regime that’s allowed companies to evade their traditional responsibilities.
Regulatory Obstacles
“The world changed underneath us but it took a crisis like this to reveal just how exposed people are,” he said.
There’s tension between states and the federal government over the design of the new measures, and why there have been delays in implementation. Illinois’ Democratic governor tweeted on Monday that the Department of Labor has created “real regulatory obstacles” to implementing the CARES Act, saying that’s holding back the state’s effort to set up systems for the self-employed.States like Oregon and Colorado have also blamed slow federal guidance for the delayed rollout. In New Mexico, officials said they had to step in with one-time cash payments of $750 to the self-employed because of repeated changes in federal advice.
In response, federal officials point the finger at the states. Only two of them have actually begun administering and paying the expanded benefits to gig-economy workers, according to John Pallasch, assistant secretary for employment and training at the Department of Labor, in spite of six sets of federal guidelines related to Covid-19 issued over the past month or so.
Breakneck Speed
Whoever’s to blame, the reality is that states are having to roll out a major new federal program, and build new IT and other infrastructure, at breakneck speed.“Something that would be normally developed over years is being done in 3-4 weeks,” said Timothy Kestner, director of economic information and analytics at the Virginia Employment Commission.In his state, Kestner estimates that almost 200,000 self-employed people and contractors could be eligible for help. And the problems won’t be over once the basic framework is in place.Because of federal reporting requirements that companies have to abide by, officials have wage data available for traditional workers – but for the self-employed, they don’t. Figuring out how much help they’re eligible for will be more complicated.
Differing Advice
State officials are also offering differing advice on how or when to apply.Virginia has asked workers like Simpson to file claims, and not panic if they’re initially denied. In Massachusetts, officials have told the self-employed to hold off until a new website is up and running on April 30. In Michigan, approvals got under way on Monday; in Ohio, they might not start until mid-May.Out of the bleak environment of the pandemic, some permanent gains for workers may yet emerge.Benefits for the self-employed and contractors are due to expire at the end of 2020. But there is already palpable pressure to make them a permanent part of the aid America makes available to its citizens in economic emergencies. Temporary government programs have a history of sticking around, and crises have a way of spurring big rethinks.
Safety Nets
The current one is spotlighting “a broader weakness of the U.S. economy,” said Alex Colvin, who heads the School of Industrial and Labor Relations at Cornell University.“We’re set up as a very entrepreneurial economy, which can be good,” he said. “But there’s that danger of creative destruction, that if things get tough we don’t have a strong safety net in place.”In the meantime, millions are left waiting for help.Lupita Silva started working for food delivery service DoorDash in Portland, Oregon last October, while she was studying web development. She could earn $120 a day working five-hour stretches.The spread of the virus made Silva, who has severe asthma, increasingly nervous about working. She filed an unemployment claim with the state website – and almost immediately realized it had gone to the wrong place.But she’s been struggling ever since to get information on where she should re-file, and what documents she might need. She keeps hearing from officials that help is coming soon, but “we’re just running around right now, trying to figure out when ‘coming soon’ is.”Meanwhile the money runs out. “I’m using all my savings to try to cover April,” said Silva. “But then May is right around the corner.”
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